The American Beverage Association, the California Retailers Association, and the California State Outdoor Advertising Association sued the city and county of San Francisco claiming a 2015 ordinance requiring warning labels on outdoor soda ads infringed their First Amendment rights.

San Francisco had planned to require this label for soda ads on billboards and bus stops: “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.”

The city had hoped their ordinance would inform consumers that consuming added sugars leads to “illnesses and associated economic burdens.” A federal judge found the city would likely prevail and refused the trade groups’ request for a preliminary injunction.

But in an opinion issued Monday, Circuit Judge Sandra Ikuta said “a literally true but misleading disclosure creates the possibility of consumer deception.” She said San Francisco’s warning label “conveys the message that sugar-sweetened beverages contribute to these health conditions regardless of the quantity consumed or other lifestyle choices.”

While San Francisco’s warning says nothing of overconsumption of sugary drinks, and how that may lead to obesity, diabetes, and tooth decay, Ikuta said the trial court had “erred in concluding that it would be unreasonable to interpret the warning to mean that sugar-sweetened beverages are uniquely or inherently unhealthy.”

In a footnote, Ikuta noted the beverage groups had given the panel a “pertinent” example of how they are being unfairly targeted: “If car dealers were required to post a warning only on Toyota vehicles that said: ‘WARNING: Toyotas contribute to roll-over crashes,’ the common-sense conclusion would be that Toyotas are more likely to cause rollovers than other vehicles.”

If the city’s ordinance had been enforced, advertising on billboards, papers, posters, bus benches, as well as ads in and on structures, vehicles, and walls were required to include a bold warning enclosed in a black box covering 20 percent of the ad space.

The trade groups argued compliance with the ordinance would deceive consumers and that the warning would completely take over their message, rendering their speech ineffective so as to “make it impractical to advertise on covered media.”

Ikuta and the panel agreed, finding the ad would be transformed into a debate stage regarding the health effects of sugary drinks – defeating the purpose of the beverage companies’ ads.

The panel also cited the U.S. Food and Drug Administration and the American Dental Association to buffer their decision. The FDA concluded that “added sugars are no more likely to cause weight gain in adults than any other source of energy,” and the ADA says that there isn’t sufficient evidence to “single out any one food or beverage product as a key driver of dental caries.”

In a concurring opinion, Senior Circuit Judge Dorothy Nelson said that while the warning’s language wasn’t controversial or misleading, the city has not properly demonstrated that their 20 percent space requirement “would not deter certain entities from advertising in their medium of choice.” Nelson said that mean “this case can be disposed of on this question alone.”

Chief U.S. District Judge J. Michael Seabright, sitting by designation from the District of Hawaii, joined the panel’s opinion.